Entrepreneurs often put years into building products and services, working to build expertise in their area. But they sometimes fail to focus on fundraising, even though it’s crucial to success, said a panel of Idaho and Utah investors.
The panel gathered March 16 at Trailhead in Boise to talk about common fundraising mistakes, and offer tips on how to secure financing.
There are never enough investors and they don’t often hand out second chances, said Bradley Bertoch, president of VentureCapital.org. So business owners should make sure to approach funders properly the first time, he said.
“You need to diagnose where you are and what you are and seek investors that do that,” Bertoch said. “Are you early stage? Are you a tech company? Should you go after an investment bank?
“If you don’t take your time, you burn good connections that you might need in six months or a year because you think they should fund you now when really they only fund later-stage companies,” he said.
There is help available in Idaho to steer business owners to the right investors, such as the Idaho Technology Council’s annual Deal Flow Report, which lists all known investment deals around the state so business owners can see where similar companies had success.
Going after the wrong funding source doesn’t only leave a bad impression with an investor, it wastes valuable time and resources, said Alexander McCoy, owner of American Ostrich Farms near Kuna.
“You have to do your research,” he said. “Even if you are trying to do crowdfunding you need to be careful about what platform you choose.
“I did a Kickstarter campaign and it turned out not to be worth it,” he said. “Food doesn’t do well on Kickstarter and I would have had a lot more success on Barnraiser, it turns out.”
But it isn’t only about getting in front of the right investor or onto the right crowdfunding platform. Just as much care and attention has to go into the support staff you contract with and the pitch you give, said Melanie Rubocki, head of the corporate group at the Boise office of the Perkins Coie law firm.
“An investor’s timeline is not your timeline,” she said. “Rest assured that there are 99 other piggy banks they are looking at and you are not the only one. You have to do something to stand out.”
Investors look for evaluations, growth projections and market verification, said Phil Bradley, director of the Boise Angel Alliance. Placing these things at the forefront of your presentation can help to attract an investor.
“You have to know your economics,” McCoy said. “You have to tell the investor, ‘If you give me your money, here is where I will put it and here is what it will do.’ You have to tell a story that shows the realm of possibilities for your company.”
Be prepared to address these key areas when asked, because you probably won’t get a second chance, Bertoch said.
Good lawyers and coaches can also increase an entrepreneur’s chances of success. An experienced support team can ensure you have good evaluations, projections, contracts and pitches, said Jerry Henley, CEO of Rubicon Capital, a company that sources deals for Sorenson and other capital firms.
“Usually you only have one chance with an investor, so it is important to find good coaches who will tell you if your presentation is bad,” Henley said.
Henley said h
e and other investors want to see a skilled team supporting the entrepreneur.
“In all reality, the best and probably most expensive money you will ever spend should be on a good lawyer,” Henley said.
Meanwhile, customer advances, crowdfunding campaigns and grants can all help a company bide time while waiting for investment, Rubocki said.
“Lots of people overlook these forms of funding,” she said. “You have to keep this stuff simple and cast a wide net because the investment process is going to take a long time and will not work out overnight,” Rubocki said. “You have to track down the right people to talk to and you are going to have to kiss a lot of frogs.”